Market Summary

Markets staged a strong rebound during the week, snapping their recent losing streak as easing crude oil prices, improving geopolitical sentiment, encouraging Q1 FY27 earnings, and renewed foreign institutional investor (FII) buying lifted risk appetite. The sharp correction in crude oil prices from recent highs provided significant relief from concerns over imported inflation, corporate margins, and India’s external balances.

As a result, benchmark indices recovered sharply, recouping a large part of the previous week’s losses. The Nifty gained 2.59% to close at 24,383.60, while the Sensex advanced 2.68% to settle at 78,094.64, marking the second consecutive monthly gain for both indices in July. The broader market also participated in the recovery, although sectoral performance remained mixed.

Key Market Drivers

Easing geopolitical tensions and the sharp decline in crude oil prices emerged as the primary catalysts for the week’s rally. Brent crude, which had briefly crossed the US$100 per barrel mark in the previous week, retreated significantly following a temporary pause in hostilities between the United States and Iran, raising hopes of a diplomatic resolution.

Global risk sentiment also improved as investors reassessed geopolitical developments alongside evolving expectations for monetary policy. The U.S. Federal Reserve maintained its policy stance, while markets continued to monitor inflation and labour market data for signals on the future path of interest rates.

On the domestic front, the ongoing Q1 FY27 earnings season drove stock-specific action, with several companies delivering encouraging results. Renewed FII buying after a prolonged phase of outflows, coupled with a nearly 16% decline in India VIX, further reinforced market sentiment and supported the recovery.

Sectoral Snapshot

Sectoral performance improved meaningfully compared with the previous week, with IT emerging as the standout performer on expectations of improving global technology spending and renewed investor interest. The Nifty IT index surged approximately 16.8% during July, marking its strongest monthly performance in several years.

Auto, pharma, and metal stocks also contributed positively, supported by selective buying in large-cap names and encouraging earnings. In contrast, FMCG and energy stocks underperformed amid profit booking and lingering margin concerns.

Key Events to Watch

The coming week is expected to be eventful, with the RBI Monetary Policy Committee (MPC) meeting (August 3–5) emerging as the key domestic trigger.

Market participants will also closely monitor the ongoing Q1 FY27 earnings season, with several large-cap and mid-cap companies scheduled to announce their results. Management commentary on demand trends, margin outlook, and capital expenditure plans will be closely tracked.

On the macroeconomic front, investors will watch the release of July Composite PMI and GST collection data for further insights into the strength of domestic economic activity.

Globally, developments surrounding the U.S.–Iran conflict, the stability of crude oil supplies through key shipping routes, and evolving expectations for U.S. monetary policy will remain important drivers of market sentiment.

Technical Outlook

Nifty

The Nifty staged a strong technical recovery after finding support near the 23,600 region, coinciding with its rising trendline support, before reclaiming the psychologically important 24,000 level. The rebound reflects renewed buying interest, while improving momentum suggests that the short-term technical structure is gradually turning positive.

A decisive close above the 24,500–24,600 zone could extend the rally towards 25,200. On the downside, 24,100 is expected to provide immediate support, followed by a stronger support zone in the 23,600–23,800 range.

Bank Nifty

Bank Nifty also witnessed a healthy recovery after the sharp correction seen in the previous week. While the index is still trading below its short-term moving averages, its medium-term structure remains intact, indicating that the broader trend continues to be constructive.

Immediate resistance is placed around 57,800. A sustained breakout above this level could pave the way for a move towards 58,600. On the downside, the 56,500–56,700 zone is expected to provide immediate support, followed by a stronger support band between 55,600 and 56,100.

Market Breadth

Market breadth improved significantly during the week, with the rebound in benchmark indices supported by broader participation across sectors. India VIX declined nearly 16% to around 11.76, reflecting easing volatility expectations and improving investor confidence.

The combination of softer crude oil prices, resilient domestic fundamentals, encouraging corporate earnings, and renewed FII buying suggests that the recovery is supported by improving underlying market conditions. However, the sustainability of the rally will continue to depend on geopolitical developments, the trajectory of crude oil prices, and the pace of earnings growth.

Strategy Ahead

The market has staged a healthy recovery, supported by resilient domestic fundamentals, encouraging earnings across select sectors, easing geopolitical concerns, and improving global risk sentiment. Nevertheless, the fragile nature of the U.S.–Iran truce, potential volatility in crude oil prices, and the upcoming RBI monetary policy decision warrant a balanced approach.

Among sectors, banking, auto, metals, and pharma continue to exhibit relative strength, while FMCG may remain under pressure due to persistent margin headwinds. Investors and traders should focus on identifying fundamentally strong stocks and sector leaders rather than adopting a broad-based approach. Maintaining disciplined position sizing and prudent risk management will remain essential amid the possibility of sharp moves driven by policy announcements, earnings outcomes, and global developments.

Ajit Mishra – SVP, Research, Religare Broking Ltd.